Utilities vs. Ratepayers: The Saga Enters it Fifth Year

Chairman Lager Says A Substitute Bill Will be Voted Out of Committee on Tuesday

by Collin Reischman

Jefferson City, MO — The battle between Ameren UE and Noranda Aluminum over electric rates is entering its fifth year, and the winners will affect the electric rates everyone in the state will pay. However, senior legislators like Senators Jason Crowell and Rob Mayer — who argued for lower rates — were replaced with freshman legislators where Ameren’s cause is currently helped by the increased stature of Sen. Mike Kehoe, R-6.

The Senate Committee on Commerce, Consumer Protection, Energy and the Environment meeting was the site of contentious testimony Tuesday.

Senate Bill 207 would permit electric utilities to add surcharges to electric bills in order to recover infrastructure investment costs. The legislation would create an “Infrastructure System Replacement Surcharge,” or ISRS.

Proponents of the bill maintain it will differ the cost of new infrastructure, ensuring higher-quality service and creating jobs in creating construction, technology and engineering.

Opponents say it drastically reduces the regulatory power of the Public Service Commission (PSC), and allows utility companies to unfairly pass costs to their ratepayers.

Committee Vice Chairman, Sen. Kehoe, is the bill’s sponsor, and testified before the committee in favor of the legislation.

“I like the phrase ‘boots-on-the-ground’ legislation,” Kehoe said. “For every $110,000 we spend on infrastructure in this way, we can create 1,000 jobs. Enemies of this legislation commonly use fear as a tool to scare people.”

Kehoe said the bill would replace aging infrastructure and save the consumer money during the long-run. He said Missouri is in need of serious electric infrastructure investment. His analogy — of the man who needs to purchase a “shiny new fridge” but puts it off — got more than one laugh from the crowd.

“Then you buy the fridge and it turns out the infrastructure behind that needs work,” Kehoe said. “So you finally buy the fridge but it doesn’t work. We are trying to get the stuff behind the fridge fixed now, so we don’t have to worry about it later.”

The bill would increase investment in electric infrastructure and create more opportunities for Missouri, Kehoe said.

Sen. Jason Holsman, D-7, said he supported the bill for its improvements and job creation potential, but has concerns about vague language and whether there was too much cost.

“I like your metaphor about the fridge,” Holsman said. “I’m just a little worried that this bill has us paying for ceiling fans as well.”

Language throughout the bill would allow a company to increase rates twice per year for various projects relating to infrastructure improvements, provided the improvements are found to be “prudent,” by the PSC.

However, the bill’s language does not exclude projects like government-mandated improvements, safety upgrades, necessary maintenance investment and modifications or environmental requirements.

Opponents of the bill said this vagueness would result in ratepayers footing the bill for non-essential projects or non-infrastructure related projects.

If the electric utility companies are not permitted to increase rates immediately upon making investments, Sen. Kurt Schaefer, R-19, and his supporters argue they won’t be able to make the improvements they want or need to make in order to increase energy availability.

The legislation has strong support among the representatives of Ameren UE, KCPL, Great Plains Energy Inc. and Westinghouse, among several other energy providers across the area. One key group who did not testify at the hearing but are supporting the legislation are the Electric Cooperatives. Barry Hart and Jim Jura sent a letter to the Governor, Senate President Pro Tem and House Speaker which read, “Having a modern safe and reliable transmission grid better positions Missouri to capture exciting new economic development opportunities and helps insure stability in disasters situations. When they are facing opportunities or adversities, a strong shared electric transmission grid is good for all Missourians.”

Holsman maintained that the language was too vague, and could allow for companies to make a wide range of improvements. The bill does not define “infrastructure,” which was a major concern for him.

“The language says you can make improvements to ‘extend the useful life of existing infrastructure’ but it doesn’t define those things,” Holsman said. “There’s room for this to work here, but I’m not comfortable with allowing for any improvements on anything and letting the ratepay

er foot the bill.”

Schaefer, who supported the legislation during testimony, said the bill was designed to allow companies to make improvements without carrying the burden of the cost with no return. Schaefer had concerns that such improvements couldn’t be funded through the traditional capital-market system.

“You invest the capital, but you don’t get a return on that investment for many years, and if you’re investing the capital but not collecting the rate of return you need, you won’t be able to get the capital for those investments,” Schaefer said.

Warner Baxter, President and CEO of Ameren of Missouri, said without the passage of the bill, they would likely have to borrow the money needed on the capital market to make investments in the state. According to Baxter, this scenario wouldn’t provide the same level of expanded service as SB207.
Steve Spinner, speaking on behalf of Monsanto Inc., spoke about the potential abuse from utility companies as a result of the bill.Other corporate heavy-hitters came out in opposition to SB207. Two officials from MIEC, an industry group that includes Anheuser Busch, Proctor & Gamble, and Ford, gave lengthy testimony in opposition to the bill.

“Surcharges really remove the incentive to operate organizations as efficiently as possible,” Spinner testified. “If you have rising fuel costs and you can just pass those down, you’ve got less incentive to lower consumption or make an effort to be cost-effective. If fuel costs go up, but you’ve got other savings and you’re actually not seeing cost increases, as a result of this legislation, you could still pass that surcharge onto others.”

In the hot seat are senators Doug Libla, R-25, and Wayne Wallingford, R-27. Both are in only their second month in the Senate, and their districts are home to not only hundreds of thousands of Ameren customers whose electric bills will increase, but also home to Noranda and hundreds of their employees.

Libla, who is not a member of the committee, attended the entire two-plus hour-long hearing, and is a key senator on the issue.

“I learned a lot of good information coming forth and I enjoyed hearing from the CEOs and other participants of these industries and utilities,” Libla told The Missouri Times. “I am concerned about the families in my district and across Missouri who are already under strain to pay their utility bills and other living expenses.”

Libla, who owned a nail manufacturing company with his brother prior to entering politics, continued, “This could have a very adverse affect on Missouri industries that provide jobs to our citizens and help us remain competitive in retaining and attracting job opportunities.”

He also indicated that in its current form he could not support the bill.

Committee Chairman, Sen. Brad Lager, R-12, allowed the meeting to extend well past the 5 p.m. deadline, and Senate did not convene until the committee completed its actions for the day.

Lager told those in attendance that the bill was still “in need of improvements,” and said the Senators involved would be meeting frequently during the next week to “discuss specific language changes or concerns they have,” regarding SB207.

Lager told The Missouri Times that during the next few days he would be holding a meeting with all interested parties, and while he seemed confident that a version of SB207 would pass the committee on Tuesday, he also was confident that “the bill will not be sent to the floor in its current form.”

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